The worst type of debt is consumer debt. If you keep a revolving balance on your credit card, you will likely stay poor forever because of the egregiously high interest rates.
When I started my career in 2015, I bought things that I really did not need: a leather jacket for $1,500, luxury watch for $2,000, and a new laptop every single year. I remember in a period from December to January where I spent over $8,000.
I knew that I had to reign in my spending and pay off my credit card debt. And I had to do it relatively quickly because credit card interest was eating away at my savings.
This is how I did it in four months.
Happy hours, dinners, lunches…. it’s a huge money suck. Happy hour ends up being $20 or $30 especially if you get a drink. Lunches can be $15-20, and dinner is typically around $30-40. When I started fasting, I started saving $30 a day on food. For my single meal – dinner, I opt for sardines in olive oil from my local grocery store, vegetables, and quinoa.
Nowadays, I only spend money eating out for special occasions such as birthdays or holidays. The end of a work-week happens every week, so there’s no point in shelling out $20 or $25 for happy hour. Since I stopped eating out, I save on average $100 a week, or $400 a month.
After crunching some numbers, I realized that I spent $2,000 on entertainment in 2015. In New York, there are amazing concerts and shows happening every single weekend. These are impossible to resist. Most concerts are around $100-150 dollars. Unless it’s an once-in-a-lifetime show, your favorite artists will most likely be returning sometime next year. Only go, if you can afford it.
I had a full-time job in investment banking Monday through Friday. With New York rent and expenses, I was not making enough to pay off my credit card debt as quickly as I wanted. Finding a second source of income is an amazing way to start chipping away at your debt.
For me, this was the ultimate game-changer that set me up for multiple sources of income. I started driving Ubers on the weekends to make extra cash. Then, I started doing remote investment banking prep for university students and charged $39 an hour. I made an extra $500 a week doing these side-hustles, which came a long way in helping me pay off my credit card debt quickly. Now, I do independent consulting for medium-sized businesses and earn even more.
Telling yourself that you won’t buy anything until you pay off your debt isn’t a realistic plan. I love clothes. Giving up shopping for a year will only make me feel deprived. Instead of buying brand name clothing, I began shopping only on Amazon Essentials.
If I needed new shoes for a specific event, I bought Amazon Essentials instead of Gucci or Ferragamo. The quality is only slightly less, but the price differences are drastic: $50 vs. $450.
It took time to build up debt, and it will take time to pay it off. You have to be kind to yourself during this journey. There is no magic bullet to paying off debt, and it can take months or even years. However, if you stick to your plan, you can chipping away at your debt and establish new money-saving habits.
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